Brazil's Growth Is Dependent on Human Capital and Infrastructure Development

Published 10:54 AM ET Sun, 11 Nov 2012
PR Newswire

Key industry leaders cite Brazil's need for greater emphasis on education, skill development and policy changes at the Samuel Curtis Johnson Graduate School of Management's business conference

Brazilian energy sector provides strong opportunity for growth

ITHACA, N.Y., Oct. 3, 2012 /PRNewswire-USNewswire/ -- Brazil has emerged with great development opportunities, particularly in the energy sector, but infrastructure and the education system in the world's sixth-largest economy pose an obstacle to reaching its full potential, according to experts on emerging markets. Industry leaders from academia, business and the public sector recently gathered together at "Brazil: A pathway into the future," a conference hosted by the Samuel Curtis Johnson Graduate School of Management's Emerging Markets Institute and Sao Paulo-based think tank, Better Brazil, to address key challenges and opportunities.

"Brazil has undergone a massive business transformation over the past two decades," said Andrew Karolyi, co-director of the Emerging Markets Institute. "While the economy and business interests in the country are certainly on the rise, the transformation will not be a complete success without resolving many infrastructure challenges, including supply-related bottlenecks."

Brazil's economy has shown significant strength since the 1990s after struggling with chronic, high inflation and GDP gains that only slightly exceeded population growth through the 1980s.[i] In the past decade, Brazil has stabilized its economy by increasing reserves of foreign currencies and shifting its debt burdens to a point where it gained investment grade status.[ii] Brazil's strength in manufacturing, mining, and agriculture provide the nation's economic foundation.

"One of the most significant challenges in Brazil is the complete lack of human capital to draw from," said Luanne Zurlo, president and founder of World Fund. Zurlo pointed out in her presentation that although most students drop out before reaching secondary school (the equivalent of high school in the United States), there is no political incentive to change the status quo to further grow and develop capital and that Brazil's education system is in vast need of reform.

Marcio Canedo, a professor from Universidade Federal do Mato Grosso do Sul, believes one particular change is necessary, namely a transition from traditional education to technical education to spark an uptick in meaningful trade skills that will foster a stronger base for human capital development.

Another obstacle that corporations in Brazil face regularly is the ability to retain talent according to a presentation by Carolina Pagano, senior director of Recruiting with Sam's Club and Wal-Mart Stores. "Without a strong foundation of human capital, corporations will continue to grapple with fostering and growing talent until there are adjustments to the current educational system," she said.

Another major hurdle to economic success in Brazil is the inferior transportation infrastructure. In his keynote speech, JetBlue CEO David Neeleman discussed this in relation to the airline industry and how challenging it is to enact simple projects such as building out the airports to accommodate more planes and flights. While he is opposed to the privatization of airports, he did note that private airports in Brazil minimize infrastructure issues.

When asked by the audience about accelerating infrastructure development, many speakers cited the need for adjustments to government regulations as the 2014 FIFA World Cup and the 2016 Olympics draw closer. There was also discussion about the lengthy procurement process and outdated government policies which hinder innovation and investment opportunities in Brazil.

Keynote speaker Humberto Luiz Ribeiro, secretary of Commerce and Services with the Brazilian Ministry of Development, assured the audience that the government is currently revising many policies to simplify the process for corporations to conduct business in Brazil. By revising outdated policies and regulations, it will entice more corporations to take advantage of the vast opportunities Brazil offers without second guessing the challenges.

A bright spot on the horizon is Brazil's abundance of natural resources and the opportunities for agribusiness. The availability of natural resources creates many investment opportunities, especially in the renewable energy sector. "Roughly 45 percent of the energy used in Brazil is renewable energy and is expected to grow over time," according to David Panico, managing director of Investment Banking with Citi. Additionally, renewable sources account for 80 percent of power generation in Brazil versus the global average of 20 percent. Brazil is also poised to become a top oil and gas player in the market creating endless openings for both the private and public sector.

While the challenges facing Brazil seem daunting, all of the industry leaders agree that the opportunities far outpace the concerns, leading to continued investment to capitalize upon Brazil's growth.

About Johnson at Cornell UniversityFounded in 1946, Johnson at Cornell University offers both a two-year and accelerated Masters of Business Administration program, as well as two executive MBA programs designed for mid-career professionals. Johnson also offers dual degree and certificate programs with law, industrial and labor relations, engineering, medicine, health administration and real estate. With 52 full-time tenured and tenure track faculty, 20 regular non-tenure track complimented by adjunct, Emeritus or visiting academics—many of whom come to Cornell from successful careers in the business world—the school offers superb instruction using a collaborative, immersive approach in which students apply what they learn to business challenges at real companies. For more information about Johnson at Cornell University please visit: www.johnson.cornell.edu.